The rupee closed at 55.71 against the dollar, a more than two-month low, on persistent dollar buying by oil companies and mounting concerns that reforms may face political hurdles.
In intra-day trade, the rupee, which opened at 55.45, touched a low of 55.87.
The rupee fell more than 6 per cent against the dollar since October.
In addition, the Indian unit dipped to its lowest against the euro at 72.266. Since October, the rupee has declined some 7 per cent against the euro.
“Despite a positive opening on Monday, the rupee lost momentum as oil companies continuously bought dollars,” said N.S. Venkatesh, Chief General Manager and Head of Treasury, IDBI Bank.
Exporters could sell dollars at around 56-level and the rupee may find some support, he added.
Last week, a top Finance Ministry official had expressed optimism that the currency will appreciate without any central bank intervention once the economy is back on an upward curve.
The US lawmakers on the opposite sides of the political spectrum are due to resume talks on ‘fiscal cliff’ this week to reach a compromise by the year-end.
Further, the forex market is awaiting the outcome of the Euro Zone Finance Ministers meeting to find a solution to the Greek debt crisis.
Due to global uncertainty and month-end oil-related dollar demand, the rupee is likely to come under further pressure during the week.
“If it is just because of month-end buying then we should see some correction coming up around first week of December otherwise the levels of 56. 50 won’t be too far,” said Abhishek Goenka, Founder and CEO, India Forex Advisors.
Vikas Babu Chittiprolu, Senior Dealer, Andhra Bank, said the rupee depreciation will have a positively effect on export-driven industries, mainly the pharmaceutical and information technology companies where exports are growing. But it could hit importers to some extent.
“Companies which have not hedged their External Commercial Borrowings will be impacted. While outbound tourism will take a hit, inbound tourism will find support,” he said.
Harit Shah, Senior Research Analyst, Nirmal Bang Institutional Equities, said, “IT companies would benefit from rupee depreciation. The average realisation for these companies in the last quarter was 55.20 to the dollar. With this quarter’s depreciation, the realisations should be higher.”